Travelers' Shareholders Approve Deal With Primerica

Travelers' Shareholders Back Primerica Deal

Travelers Corp. Wednesday closed a big part of its $722.5 million capital-raising deal with Primerica Corp. after Travelers shareholders overwhelmingly approved the arrangement.

At a special shareholders' meeting at Travelers, stockholders' questions reflected concern about control of Travelers, the price of the deal, and its effect on their own investment and stock dividends.

However, 74,773,284, or 96 percent of the shares voted, were cast in favor of the deal, and 2,362,049, or 3 percent, were voted against it. Others abstained. Other federal and state approvals have been granted.

When the deal is completed -- probably by yearend -- New York-based Primerica Corp. will own 26.6 percent of Travelers' common stock.

A partial closing on Wednesday gave Primerica 22 percent of Travelers' stock in return for a $572.5 million addition to Travelers' equity. For 30,131,578 newly issued Travelers shares, the Hartford insurer received $550 million in cash and 100 percent of the preferred provider organization and thirdparty administrator networks of Primerica's Transport Life/Voyager Group.

In the final part of the deal, Primerica will get another 7.9 million Travelers shares, and Travelers will get 50 percent of the equity of Commercial Insurance Resources Inc., the parent of Primerica's Gulf Insurance Co.

As part of the previously announced agreement, Primerica Wednesday added two more representatives to Travelers' board of directors: Robert I. Lipp and Frank G. Zarb, both vice chairmen at Primerica.

In September, when the deal was announced, Sanford I. Weill, chairman and chief executive officer of Primerica, and James Dimon, the company's president and chief financial officer, joined Travelers' board. Primerica now controls four of 16 Travelers' board seats.

Lipp is chairman and chief executive of Primerica's Commercial

Credit Group. Before joining Commercial Credit in 1986, he served as president and director of Chemical New York Corp. and Chemical Bank, its principal subsidiary.

Zarb is chairman and chief executive of Smith Barney Inc., a Primerica subsidiary. Previously he was a senior partner at Lazard Freres & Co., an investment banking firm.

Travelers, pressured by a higher percentage of problem mortgage investments than many insurers, struck the Primerica deal to build financial strength. It is part of $1.4 billion in capital raised this year, as Travelers struggles to maintain its financial health ratings.

"A solid capital base is essential in the financial services business," Edward H. Budd, Travelers' chairman and chief executive, told shareholders. "It protects our policyholders. It determines how much business we can write and how fast we can grow. And it is a key measure of financial strength that shapes the perceptions of customers and rating agencies as well as regulators."

A.M. Best Co., however, this week dropped its rating on Travelers' life and health operations to A from A, keeping it in the "excellent" range.

Budd said there are signs that Travelers' mortgage problems are peaking. The level of problems changed little from the second quarter to the third quarter this year, and he expects no significant change in the fourth quarter.

At Wednesday's shareholders' meeting, Seymour G. Reitman, a West Hartford shareholder and retired Travelers employee, voiced concern about the stock dividend and the effect of the Primerica deal on current Travelers stockholders.

Budd said he expects Travelers to maintain its quarterly 40-cent-a-share dividend, and that will be his recommendation to the board. However, he noted, in the long term, Travelers' earnings must be strong enough to carry the dividend.

Shareholders' equity in Travelers was $41.67 a share on Sept. 30. The Primerica deal will reduce the equity per share to about $36 million, Budd acknowledged.

Commenting briefly about the $19 a share that Primerica is paying for Travelers' stock, Budd said that was in the range the stock had been trading at before the deal was struck. The closing price was $17.50 on the last day of trading before the deal was announced.

Analysts greeted the deal with praise, and the stock price jumped immediately. It closed at $24.87 1/2 a share Wednesday -- well above what Primerica is paying.

Some shareholders have expressed worries about how big a role Weill will play at Travelers. But Weill, who sports a Travelers red umbrella pin on his lapel, implied Wednesday he has no interest in a fulltime executive post at the Hartford company.

In a press conference Wednesday, Weill said, "I have a job. I'm chairman of Primerica. I'm very happy with what I do, and I'm very happy with my association with people at Travelers. We seem to have an ability to raise issues together and focus on those issues."

Analysts and others assume Weill already has a strong say in Travelers' strategy. He heads a newly created finance committee of the board and is cochairman with Budd of an "operating committee." Weill is suspected by some employees of being an instigator of boosting job cuts at Travelers, but Budd said Wednesday that the announced increase in job cuts to 5,000 resulted from Travelers'

own budget review for 1993-94.

"As we began to roll through the numbers, it became evident that in order to improve our earnings, we needed more in the way of downsizing," Budd said.

Weill noted that the long-term goal is to increase Travelers' employment, but that the only way to do that "is to get the company doing well, earning more for its shareholders, so it can invest in its future."